The Netflix Price War
Have you ever heard of Netflix? Of course you have. As one of the largest media companies in the world, Netflix is a staple of many consumer’s media consumption. The streaming platform’s wide variety of content helps appeal to a vast audience. To support itself, Netflix runs on a monthly subscription-based system. This system, however, has become a source of controversy over the last few years.
Around May of 2019, Netflix announced that it would be raising prices across all of its monthly offerings again. This was done as a result of missing new subscriber projections and other revenue issues. To justify the increase, Netflix stated the higher cost will help to continue improving the quality of the platform. Netflix relies a lot on external productions and these come at a cost. Netflix reportedly spent $100 million on retaining the streaming rights to Friends. To combat this, Netflix is trying to transition into making more of its own content. With that said, funding needs to increase to support this process. Raising prices may be viable for Netflix, however, the growth of the company will come at a cost to consumers.
Most streaming service subscribers already have a high monthly bill for entertainment. It is estimated that U.S. consumers are willing to spend a total of around $38 per month for all their streaming services. By Netflix raising its price, that monthly cost will continue to increase. “Subscription Burnout” is becoming common among many viewers as more services are being introduced. If this trend is to continue, the prospect of a $50 monthly bill is very possible. That is just not an option for many consumers.
Netflix’s growth in new subscribers has been starting to taper off. The drop in new subscribers is quite large. Netflix apparently added only 2.7 million subscribers outside the United States in the second quarter of 2019. This is far below the expected 5 million subscribers. A continual rise in fees will leave fewer people able to stay subscribed to Netflix. It will also prevent potential new subscribers from considering the service.
If Netflix is to continue to increase its monthly costs it will become a larger issue. For any product, there is a balance between cost and value. To truly justify higher prices, Netflix will need to offer a constant stream of original content that draws millions of new and current viewers in. Consumers will look to other services if they offer better value and more of what they want to watch.
Many other media companies will be releasing their own platforms soon which will further take potential and current subscribers away. Netflix needs to make its service stand out against all the new competition. As a company, it will be hard to increase revenue if they do not find a way to gain new subscribers. Charging current customers more will only work for so long. The market for online video streaming is becoming much more saturated than it was a few years ago. To remain the king of streaming, Netflix will have a lot of work to do.
